Ten relatively fool proof money predictions for 2020
Predicting the future is often a fool’s game but there are some things we can confidently expect to happen – and they’ll all affect the pound in your pocket.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, has collated her top ten.
There’s a good chance your overdraft rate will rise
From April, banks won’t be able to charge different amounts for arranged and unarranged overdrafts – but will need to offer a simple overall rate. The two banks who have announced rates so far have set them at 39.9%. If you use an arranged overdraft this is likely to be an enormous jump in charges.
We’ll get into more debt
The rate at which household borrowing has risen has been slowing since 2017. Back then it was up around 10% in a year – whereas by the end of 2019 it was growing at around 6%. But it’s still on the up, and that’s not going to change any time soon.
Brexit uncertainty is here to stay
What happens next in the great Brexit saga is anyone’s guess, but we do know that this won’t be the end of the story. Even if a withdrawal agreement is passed smartish, uncertainty will remain in the years we’re thrashing out a trade deal.
If you’re putting off investing until you know where you stand it’ll be another year of inaction and delay. However, we can ill-afford to put off preparing for the future, so one sensible option is to invest on a monthly basis, so you’re drip feeding money into the markets. If share values were to fall in any one month you’d get more for your money, and then benefit from any subsequent rises.
Interest rates should stay at historic lows
The level of uncertainty in the economy means the Bank of England won’t be keen to raise interest rates. At the moment the market isn’t pricing in any moves at all throughout 2020, and when we finally get changes to the interest rate, it’s generally expected to be a cut rather than a rise. Of course, there’s always the chance of an external shock surprising everyone, but at the moment it looks set to be a bad year for savers and a good year for mortgage borrowers.
Inflation will keep quietly keep eroding the value of our money
We’re not expecting any big jumps in inflation, but it doesn’t need to be sky high to do some damage. Even modest inflation around 2% will dent the value of money in a typical high street easy access account paying 0.15%. If you were to keep your cash in this typical account, and inflation ran at 2% for the next five years, you’d have lost almost 10% of the spending power of your money
New banks and building societies will offer the best savings rates – but most people won’t use them
The best way to fight the impact of inflation on your savings, is to invest with a new online bank or building society offering competitive rates. But only 8% of people choose to do this. Our research shows we’re worried it’ll be a hassle to switch, we don’t think it’s worth it, and we’re happy putting our trust in our bank. But given that in some cases we can get almost 10 times as much interest, and that we have all the same protections as we do from our current bank, it’s time to reconsider.
You’ll have at least one unexpected bill out of the blue
In any given year, it’s a racing certainty you’ll end up with at least one expense you’re not expecting. One recent survey put the average cost of unexpected bills at £328 a year. If you don’t have an emergency cash savings safety net, ask yourself how you would meet the cost.
The high street won’t make it through the year intact
The ongoing shift of shopping from the high street to mobiles is going to continue to take casualties. The pressure on retailers won’t let up, so we can expect to see more of the high street failures we’ve become used to over recent years.
We’ll be warned that Black Friday deals aren’t all they’re cracked up to be, and we’ll spend record sums anyway
This is an established trend now, and one we’re showing no signs of tiring of. Each year Which? does an in-depth investigation showing that prices are lower at other times of year, and then each year we’re tempted by the deals anyway. According to Barclaycard, Black Friday spending was up 16% in 2019.
Scammers won’t stop
Some scams are far more sophisticated than others. Most of us will simply see a number of relatively straightforward spam emails and texts which use a number of techniques to persuade us to send our personal details to the scammers.
At the other end of the spectrum, however, they can be enormously complex, and you may receive an email from an address you recognise, talking about money you know you need to pay, and providing a bank account to pay into. The safest approach is to always assume something is a scam until you know otherwise. If you’re worried that you owe someone money or need to send them details, contact them (using details separate to the ones they gave you when they emailed) and check.